The 36-year-old Lewis Hamilton’s previous deal lapsed in 2020 but he will now race for Mercedes for a ninth season.
Lewis Hamilton became the sport’s most successful driver ever in 2020.
He broke Michael Schumacher’s all-time win record and drawing level with the German’s seven titles.
“Our team has achieved incredible things together,” Lewis Hamilton said before adding.
“We look forward to building on our success even further.”
“While continuously looking to improve, both on and off the track.”
Lewis Hamilton’s new deal details
Part of the new deal involves a commitment from Mercedes to continue to work with Lewis Hamilton.
They will be seeking ‘greater diversity and inclusion in motorsport’.
They will work on creating a new joint charitable foundation and Hamilton says the manufacturer has been extremely supportive on the issue.
“I’m proud to say we are taking that effort further this year by launching a foundation dedicated to diversity and inclusion in the sport.”
“I am inspired by all that we can build together and can’t wait to get back on the track in March,” he added.
Team boss Toto Wolff said the duration of the contract was a consequence of the lateness of the talks.
This was caused by them having to delay negotiations when Lewis Hamilton contracted Covid in December, and their mutual desire to see how the world develops.
Wolff said no decision had been made on whether the Briton driver would race on beyond 2021.
Hamilton’s defence of his title begins at the Bahrain Grand Prix on 26 March.
If he can win a fifth drivers’ championship in a row he will surpass the all-time record of seven he shares with Michael Schumacher.
He has won six of his world titles at Mercedes, with the other arriving at McLaren in 2008.
The Briton agreed a deal believed to be worth £30million to race